- Stock Markets on Monday: FII selling, US market corrections remain a pain point for domestic equities; Anil Singhvi gives trigge
- Even as US markets fell, Nasdaq gets into deeper correction; sees 10% drop from November highs and worst week since 2020
- ICICI Bank Q3FY22 net profit rises 19% to Rs 6,536 cr
- Budget 2022 Expectations: USD14 bn warehousing industry ready with its wishlist ahead of budget
- Mutual Fund in 2021: Equity outperforms Fixed Deposit, gold loses sheen while debt schemes least favoured by millennials
Income tax calculator: Old tax slabs or new ones in times of Coronavirus? Just do it this way
Government has introduced a new optional personal income tax regime for individual / HUF taxpayers through the Finance Act, 2020 . Such personal tax regime has been incorporated in the Income Tax Act, 1961 by way of section 115BAC applicable from financial year 2020-21.
Government has introduced a new optional personal income tax regime for individual / HUF taxpayers through the Finance Act, 2020 . Such personal tax regime has been incorporated in the Income Tax Act, 1961 by way of section 115BAC applicable from financial year 2020-21. A key feature of this new regime is that the income tax slab rates have been significantly reduced. Yes, very much so! However, the new rates come at the cost of specified key income tax exemptions and deductions, which are currently available under the old income tax regime.
The specified income tax exemptions include deductions under section 80C, 80D, 80CCD(1B), interest on housing loan, house rent allowance, standard deduction, etc.) - one has to forego these while opting for new tax regime.
When is the new income tax regime beneficial?
Only if the additional tax due to foregoing specified exemptions and deductions is less than tax saving in the New Regime for income taxpayers. Check income tax slabs calculator below:
Every employee who wanted to opt for the concessional tax regime would have to notify their employer about the same for each previous year. Thus, the employee would be required to ascertain his estimated income for the year and accordingly intimate his choice to the employer at the beginning of the financial period itself. Such intimation made to the employer cannot be altered during the course of the year, but the employee has the liberty to change the option while filing his return of income for the year.
Rs 78,000 BENEFIT in new Income tax slabs during times of Coronavirus
Due to the current outbreak of COVID-19 in India, employees may be uncertain about their income level considering the possibilities of lay-offs, substantial pay cuts, loss of performance-based incentives, etc. and may prefer cash over long-term investments.
The new Tax Regime comes as a relief to those who want to avail the lower rate of taxation and at the same time are not in a position or do not wish to make investments in eligible instruments due to long term nature of investments.
The new tax regime has the potential to provide a tax relief of maximum Rs 78,000 without any investments into eligible investment avenue, which is appreciable considering the current lockdown and financial stress. The new regime would enable the employees who are impacted by the Covid19 pandemic to maintain sufficient disposable income in their hands not only to survive the period of crisis but also the post crisis period.
Who needs to check BOTH Slabs?
However, individuals who have significant income level or ample amount of savings may evaluate both the regimes in order to determine the beneficial of the two. Nevertheless, in case the employee has sufficient funds for investment purposes before the end of the financial year i.e. March 2021, he can still make specified investments and opt for the old regime while filing the tax return, if it is beneficial.
Also, for individuals (other than those having business income), can opt for the beneficial tax regime, old or new, every year, while those having business income, have a choice to change the tax regime only once.
Thus, providing due consideration to various factors such as current and potential income level and investments, liquidity and fund requirement, risk tolerance for the crisis, etc., every individual should make their own choice on the regimes for the crisis.
(By Dr (CA) Suresh Surana, Founder, RSM India)
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.